Required Rate of Return

As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose rRF = 8%, rM = 13%, and bUT = 2.0.

Under current conditions, what is rUT, the required rate of return on UT Stock? Round your answer to two decimal places. %

Now suppose rRF increases to 9%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-IIIIIIIVVItem 2 I. Both rM and rUT will increase by 1%. II. rM will remain the same and rUT will increase by 1%. III. rM will increase by 1% and rUT will remain the same. IV. Both rM and rUT will decrease by 1%. V. Both rM and rUT will remain the same.

Suppose rRF decreases to 7%. The slope of the SML remains constant. How would this affect rM and rUT? -Select-VIVIIIIIIItem 3 I. rM will decrease by 1% and rUT will remain the same. II. rM will remain the same and rUT will decrease by 1%. III. Both rM and rUT will increase by 1%. IV. Both rM and rUT will remain the same. V. Both rM and rUT will decrease by 1%.

Now assume rRF remains at 8% but rM increases to 15%. The slope of the SML does not remain constant. How would these changes affect rUT? -Select-IIIIIIItem 4 I. rUT will decrease by 4%. II. rUT will remain the same. III. rUT will increase by 4%.

Assume rRF remains at 8% but rM falls to 12%. The slope of the SML does not remain constant. How would these changes affect rUT? -Select-IIIIIIItem 5 I. rUT will decrease by 2%. II. rUT will remain the same. III. rUT will increase by 2%.